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Financial Services Law Insights and Observations


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  • CFPB To Collect Information on Compliance Costs, Hold Hearing on Prepaid Cards


    On May 15, the CFPB published a notice and request for comment regarding its collection of information concerning the costs expected to be incurred by institutions required to comply with CFPB rules. The notice identifies specifically the need to collect information about costs to mortgage and remittance industry participants in connection with upcoming CFPB rules. The notice further states that the CFPB seeks to understand the effect of compliance costs on financial service providers and consumers, but that it is particularly interested in the impact of regulations on the unit costs of delivering specific consumer products and services. The CFPB plans to use structured interviews, focus groups, written questionnaires, and other methods to collect the needed information, and will attempt to collect a representative sample of providers from affected markets. The public is invited to comment on the notice through June 19, 2012. On May 17, the CFPB announced that it will hold a public hearing to discuss issues in the prepaid cards market. The hearing is scheduled to take place on May 23, 2012 inDurham,NC, and will include remarks from Director Cordray.

    CFPB Prepaid Cards

  • CFPB Releases First Semi-Annual Report, Director Testifies Before Senate Banking Committee


    On January 31, the Consumer Financial Protection Bureau (CFPB) released its first semi-annual report to Congress and CFPB Director Richard Cordray appeared before the Senate Banking Committee. The report reviews the CFPB's structure and purpose, and provides a general overview of the CFPB's activities to date. The report also identifies consumer "shopping challenges" by product category (i.e., challenges that consumers face when shopping for mortgages, credit cards, and student loans), and identifies the CFPB's planned activities for the next six months.

    Issues raised during the Senate hearing included: (i) prepaid card regulation, (ii) the definition of "abusive" as it is used in the Dodd-Frank Act, (iii) the "ability to pay" rule required by Dodd-Frank, and (iv) treatment of privileged information during the examination process. First, the Director acknowledged the importance of innovation in the card market, but also noted that regulation of credit and debit cards likely have pushed the market towards prepaid cards. He noted legislation sponsored by Senator Menendez to regulate the prepaid card market, and said the Bureau would welcome legislation addressing prepaid card issues. Second, consistent with his statements to the House Financial Services Committee, the Director reported that a rulemaking to further define the term "abusive" is not currently on the CFPB's agenda. Third, Director Cordray did not provide insight into the CFPB's view of the "ability to repay" rule, noting that at this time the Bureau has not prepared a draft rule. Finally, Director Cordray indicated support for a legislative fix to protect legal privileges applicable to documents and information that could be requested by the CFPB during the course of its examinations.

    CFPB Prepaid Cards


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